Why Some Men Earn Less Than They Did 40 Years Ago

Last Tuesday, the government's annual poverty and income report revealed that the earnings of male workers in the middle of the income ladder are lower today than they were almost 40 years ago.

In 1973, the median male worker earned just over $49,000 when adjusted for inflation, while in 2010 that worker made about $1,500 less. Yet, in the same period, the output of the economy has more than doubled, and the productivity of workers has risen steadily.

What Has Changed

MIT economics professor Frank Levy says U.S. blue-collar workers had two things going for them between World War II and the 1970s that they no longer have.

"One was that you had a really strong job market for blue-collar labor," he says.

The strong market was partly because European countries and Japan were still rebuilding their manufacturing capacity, destroyed during the war. Also, a lot of technology that has since replaced labor hadn't come on line yet. Levy says these factors provided "a lot of jobs in manufacturing and other related occupations."

Those workers, Levy says, also had a set of institutions and societal norms that came out of the Great Depression and the New Deal, which ensured wages would grow for most people as productivity grew.

"There were kind of conventions about getting cost-of-living wages. Unions were part of it, and even the government getting involved implicitly in wage and price decisions was part of it," he says.

However, after the food and oil price spikes of the 1970s — a decade in which the Consumer Price Index rose whopping 100 percent — the idea of wages rising in lock-step with the cost of living was abandoned.

"What you got was a more minute-to-minute, free-market calibration of what wages were like," Levy says.

Add to that global competition and technological innovation that eliminated U.S. manufacturing jobs, and the country ended up with a surplus of blue-collar workers. Companies didn't have to raise wages to attract and keep them.

Some analysts have suggested that wages have stagnated because workers are being compensated with costly health-care benefits now. Levy says that's offset by the loss of pension benefits, so factoring in fringe benefits doesn't change the trend.

The Education Factor

One big problem is that today's median American male worker has the same level of education as his counterpart in 1973. He has just a high school diploma — no college — so he's not well prepared to compete for better jobs.

"Educational progress sort of atrophied," University of Wisconsin economist Tim Smeeding says. "So, in other words, we have not been graduating people from college as fast as we should have."

Just over 30 percent of men attend college today. Women attend and graduate college at significantly higher rates. Their median earnings, while still lower than men's, have been rising along with productivity growth in the past decades.

Over the last 20 years, even men who have college degrees haven't seen their wages reflect the growth in productivity. It's only men with advanced degrees who have kept up and have done very well.

Meanwhile, global competitors are raising the education levels of their workers. If America doesn't figure out how to raise the skill levels of its workforce, the future could continue to be bleak for those in the middle, Smeeding says.

"I'm afraid we have a lost generation out there of young people aren't well prepared, who can't find work, and they're never going to realize the American dream," he says.

If the fundamental American dream is that each generation does better than the previous one, that hasn't been happening for men in the middle of the U.S. income ladder for decades.

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SCOTT SIMON, Host:

This week, the U.S. government's annual poverty and income report showed poverty increasing and household income dropping last year. But it was this piece of data from the report that really struck us: The earnings of male workers right in the middle of the income ladder are lower today, adjusted for inflation, than they were in 1973 - almost 40 years ago. We wondered how that could be, and asked NPR's John Ydstie to find out.

JOHN YDSTIE: It's right there, in Table A5 of the report. In 1973, the median male worker earned just over $49,000 when measured in today's dollars while last year, that worker right in the middle made about $1,500 less. Given that the output of the economy has more than doubled since 1973, and the productivity of workers has risen steadily, how is that possible? MIT economics professor Frank Levy says U.S. blue-collar workers had two things going for them between World War II and the 1970s.

YDSTIE: One was that you really had a very strong job market for blue-collar labor.

YDSTIE: That's partly because European countries and Japan were still rebuilding their manufacturing capacity destroyed during the war. Also, a lot of technology that has since replaced labor hadn't come online yet.

LEVY: And so that meant that there were a lot of jobs in manufacturing, and other related occupations, for blue-collar labor.

YDSTIE: The other thing that median American male worker had going for him back then, says Levy, was a set of institutions and societal norms that came out of the Great Depression and the New Deal, that ensured wages would grow for most people as productivity grew.

LEVY: So there were kind of conventions about getting cost-of-living wages. Unions were part of it, and even the government getting involved implicitly in wage and price decisions was part of it.

YDSTIE: President Nixon imposing wage and price controls in 1971, for instance. But after the food and oil price spikes of the 1970s, a decade in which the Consumer Price Index rose a whopping 100 percent, the idea of wages rising in lockstep with the cost of living was abandoned.

LEVY: And so what you got was much more of a minute-to-minute, free-market calibration of what wages were like.

YDSTIE: Add to that global competition and technological innovation that eliminated U.S. manufacturing jobs, and we ended up with a surplus of blue-collar workers. So companies didn't have to raise wages to attract and keep them. Some analysts have suggested that wages have stagnated because workers are being compensated with costly health-care benefits now. But Levy says that's offset by the loss of pension benefits, so factoring in fringe benefits doesn't change the trend. One big problem is that today's median American male worker has the same level of education as his counterpart in 1973 - just a high school diploma, no college - so he's not well prepared to compete for better jobs.

TIM SMEEDING: Educational progress sort of atrophied.

YDSTIE: That's University of Wisconsin economist Tim Smeeding.

SMEEDING: So in other words, we have not been graduating people from college as fast as we should have.

YDSTIE: Meanwhile, our global competitors are raising the education levels of their workers. If America doesn't figure out how to raise the skill levels of its workforce, the future could continue to be bleak for those in the middle, says professor Smeeding.

SMEEDING: I'm afraid we have a lost generation out there of young people who aren't well-prepared, who can't find work. And they're never going to realize the American dream.

YDSTIE: If the fundamental American dream is that each generation does better than the previous one, that hasn't been happening for men in the middle of the U.S. income ladder, for decades. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.